Lapse In Funding For HUD Multifamily Due To Government Shutdown

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Federal Unpaid Workers Owe $438 Million In Rent And Mortgage Payments This Month

The effects of the federal government shutdown on the housing market are wide-ranging and personal — unpaid workers still have to pay their rent or mortgage, while aspiring homeowners might see their loans in limbo, according to research from Zillow.

About 800,000 unpaid workers (about 380,000 are furloughed and another 420,000 are working without pay), still must find ways to pay for their housing as the shutdown heads into its third week.

HUD letter asks landlords to use their reserve accounts rather than evictions

The U.S. Department of Housing and Urban Development has sent a letter to landlords, according to the Washington Post, to blunt the impact of a lapse in funding for its multifamily programs, which were not renewed before the government shut down on Dec. 21.

They are asking landlords to use their reserve accounts rather than evict their tenants.

“As you are aware, the partial government shutdown continues as the Department of Housing and Urban Development’s spending authority expired on Friday, December 21, 2018, due to the lack of appropriated funding. Pending appropriations needed to operate, most FHA multifamily activities must cease for the duration of the shutdown. Separate guidance will be issued with respect to Asset Management activities,” HUD said in the letter.

Unpaid workers and renters owe $189 million

A recent HotPads® analysis found that renters within that group pay about $189 million for housing each month.

 Zillow estimates that federal employees who are not being paid during the shutdown and own their homes pay about $249 million in monthly mortgage payments.

Missed payments can lead to eviction and foreclosure

“Like Americans in the private sector, many federal employees rely on each and every paycheck to cover critical expenses, including housing. In many parts of the country, housing affordability is already stretched and a single missed payment can begin the long process toward foreclosure or eviction – which has long term impacts on an individual’s finances and long-term economic prospects,” Zillow senior economist Aaron Terrazas said in a release.

 “It also could have a significant impact on the overall housing market if it continues to drag on and furloughed workers who also are would-be buyers get cold feet in the absence of paychecks. Buying a home is a huge leap of faith for many, as they bet on continued job security and steady income to finance their home, and consumer confidence is paramount,” he said in the release.

Zillow analysis estimates that about 3,900 mortgage originations are processed each business day for loans backed directly by federal government agencies such as the FHA and the Rural Housing Service. It isn’t clear what portion of those are delayed – or for how long – because of the limited staff during the shutdown, but as many as 39,000 mortgages could have been affected by today. When those loans are delayed, it most affects those facing the greatest hurdles to become homeowners. FHA also won’t insure reverse mortgages or home-improvement loans during the shutdown.

The U.S. Department of Housing and Urban Development says it does not expect a significant impact as long as the shutdown is brief. But “with each day the shutdown continues, we can expect an increase in the impacts on potential homeowners, home sellers and the entire housing market,” the agency says.

In addition, the shutdown could lead to administrative delays associated with loans backed by Fannie Mae and Freddie Mac, two independent agencies that insure the vast majority of mortgages. Those include lenders unable to get verification of employment for borrowers who are federal employees, and potential IRS delays verifying borrower incomes, which could lead to loans being denied.

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